The pain California residents are feeling at gas pumps is spilling over to other parts of their lives.
Extra money spent on gas is being diverted from other purchases, even as the prices of products and services are being pushed higher by rising fuel costs. And, economists say, don’t underestimate the psychological damage to consumers if gas prices continue an expected rise to $4 a gallon and above.
“Oil and gas prices have such broad implications,” said Suzanne O’Keefe, an economics professor at Sacramento State. “It trickles through so many sectors and aspects of our consumption.”
Last week was one of the worst in an unusual series of wintertime gas price spikes as the average retail price soared 20 cents a gallon in the San Luis Obispo-Atascadero-Paso Robles region. On Monday the average price for regular unleaded in the region was $3.81 per gallon.
The national average increased 17 cents a gallon in the past week to $3.34, 25.3 cents higher than a month ago and 64.9 cents higher than last year.
The main culprit has been continued unrest in the Middle East and North Africa, particularly Libya. Analysts said the situation created fear of crude oil delivery disruptions, which in turn drove crude prices above $100 a barrel last week.
Patrick DeHaan, senior petroleum analyst for GasBuddy.com — a price-tracking website — said oil markets have probably already absorbed the full damage of the Middle East unrest. But he sees other pressures pushing gas prices higher in coming weeks, including refineries switching to more expensive spring and summer gasoline blends.
“It appears all but certain that we’ll break through the $4-a-gallon threshold in California,” DeHaan said. “In Sacramento, right now I’m tracking $3.95 to $4.35 (a gallon) by Memorial Day.”
Jeff Michael, director of the Business Forecast Center at University of the Pacific in Stockton, said fuel prices already are affecting consumer spending and psychology.
“The primary effect is that it reduces the amount of money consumers have; the more they spend on gas, the less they can spend on goods and services,” Michael said. “It takes the momentum out of consumer spending that we’ve seen the last couple of months. It counteracts the tax- cut package in December.”
Farmers are watching the fuel pump as closely as motorists, said Wendy Fink-Weber of the Western Growers Association.
Fuel and fertilizer are among growers’ top costs, but she said they’re trying to hold the line against raising food prices by such means as negotiating long-term fuel contracts and delivering produce more efficiently.
“Three years ago (when gas went above $4 a gallon) was a big problem,” she said. “No one likes it when fuel prices go up.”
But Michael Shaw of the California Trucking Association said rising fuel costs will inevitably be passed on to suppliers and consumers.
“As fuel prices go up, it’s the price of doing business. You’ll look to higher costs of goods for the consumer,” he said. “That box of cereal or the television you buy — look on the shelf, and fuel prices are built into that.”
Julia Hickey contributed to this report.
Local gas prices
Average unleaded regular gas prices for the San Luis Obispo-Atascadero-Paso Robles area:
Week ago: $3.61
Month ago: $3.41
Year ago: $3.04
Highest recorded average price: $4.68 on July 15, 2008
— Julia Hickey
Source: AAA’s Oil Price Information Service